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Office leasing shows strong recovery

The Grade A office-leasing market in Taipei City continued to see strong recovery in the first quarter of the year, with vacancy rate diving to a three-year low, according to a report released by an international real-estate agency yesterday.

The report, released by Jones Lang LaSalle International Property Consultants, indicated that the vacancy rate of Grade A office space in Taipei City fell to 6.3 percent in the first quarter, the lowest level since the third quarter of 2001 and down from 7.9 percent in the last quarter of last year.

The average monthly rental also went up, rising 1.2 percent in the first quarter to NT$2,200 per ping, the report said. This figure represents 6.5 percent growth from the second quarter of last year, the report added.

In total, 6,270 ping of Grade A office space was taken up in the first quarter of this year, with the Dunhua S Road precinct setting the pace, accounting for over 3,500 ping of this figure, the report said.

The demand came mainly from firms that are already renting Grade A property, but are seeking to enlarge their premises as a result of business expansion, the report said.

The second factor driving the rental recovery is the fact that Grade A space is still relatively cheap compared with the last 10 years. As a result, many firms were taking the opportunity to move into Grade A office space from Grade B and C properties, according to the report.

Office tenants' first choice is Xinyi district, which enjoyed the lowest vacancy rate of 4.3 percent and the highest average monthly rental of NT$2,350 per ping, followed by the Dunhua S Road precinct with a 4.9 percent vacancy rate and average rental of NT$2,250 per ping.

But Xinyi will not stay on top for long, said Steven Craig, head of research at Jones Lang LaSalle.

He said that the vacancy rate in the district will increase significantly when the Taipei 101 building officially releases its office space to the market in the second quarter.

Earlier this month, the occupancy rate at Taipei 101 was about 30 percent of the skyscraper's 54,000 ping of office space, according to the Taipei Financial Center Corp (台北金融大樓公司), which owns the building.

Taipei Financial Center expects the occupancy rate in Taipei 101 to reach between 60 percent and 70 percent by the year's end, and 95 percent before the end of next year.

Old office buildings without advanced hardware such as back-up power systems, fiber-optic cabling and efficient air-condition and even fire control systems will have a hard time surviving in the market, as tenants are increasingly insisting on these facilities, the report said.
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